Barclays Credit-Rating Threat as Lawmakers Vote on Probe

Barclays stock is down 5.5 percent this year, making Barclays the worst performer in the six-member FTSE 350 banks index. Photographer: Chris Ratcliffe/Bloomberg

July 5 (Bloomberg) -- Barclays Plc’s credit ratings are
under threat after its top three executives quit and lawmakers
prepared to open an inquiry into the Libor-rate rigging scandal.

Moody’s Investors Service cut the outlook on the London-based lender’s standalone bank financial strength to negative
from stable, according to a statement today. Standard & Poor’s
followed, lowering the long-term rating outlook to negative.
The ratings companies cited political pressure on the lender’s
investment bank, and the departure of Chief Executive Officer
Robert Diamond.

The executives stepped down after the lender was fined a
record 290 million pounds ($452 million) for trying to rig the
London interbank offered rate for profit. U.K. lawmakers will
vote today on what type of inquiry they will hold into
Barclays’s attempts to manipulate the benchmark.

“Hitherto, Barclays’ strong and stable management team and
clear strategy have been supportive factors in our ratings
assessment,” Standard & Poor’s said. “Diamond was closely
related to the growth and relatively resilient performance of
the investment bank.”

Barclays shares fell 0.4 percent to 165.30 pence at 11:05
a.m. in London trading today. They plunged 16 percent on June
28, the day after the bank’s settlement with regulators was
announced. The stock is down 5.5 percent this year, making
Barclays the worst performer in the six-member FTSE 350 banks
index.

‘Political Pressures’

Lawmakers are poised to decide on the type of inquiry into
Libor-manipulation, determining how deeply to examine the issue
and how quickly changes to the law may follow. Members of
Parliament will decide between a judge-led inquiry into the
industry sought by opposition Labour Party leader Ed Miliband
and the six-month-long lawmaker-led probe focused on Libor
favored by Prime Minister David Cameron. A series of votes are
scheduled for around 5 p.m. in London.

“Political pressures” could “lead to broader pressure on
the bank to shift its business model away from investment
banking,” Moody’s said. “Although this could have potentially
positive implications over the longer term, the uncertainty
surrounding such a change in direction is credit negative in the
short term.”

Diamond, 60, joined Barclays in 1996 and as head of
Barclays Capital oversaw the lender’s expansion in investment
banking and the 2008 purchase of Lehman Brothers Holdings Inc.’s
North American unit. He was named CEO in January 2011.

Agius, Del Missier

Diamond, Chairman Marcus Agius and Chief Operating Officer
Jerry Del Missier also stepped down after regulators discovered
bank employees had systematically attempted to rig the rate for
profit. Diamond yesterday apologized to lawmakers for the
rigging, blaming a group of 14 traders out of 2,000, and said
the bank had failed in taking so long to uncover their actions.
He said he didn’t know about their activities until a week
before regulators published their findings, including e-mails
between Barclays traders.